When Cutting Costs… Adds Them: Evaluating Decisions for Value & Complexity (Part 1)

Recently, I’ve had the chance to experience several cases where well-intentioned managers made decisions to “cut costs” – actions which in immediate near-term ways lowered incremental spending – and created unintended consequences that over time actually RAISED costs.  Over the coming weeks, we’ll explore these in some detail.  Is your organization making some of these sorts of questionable decisions - imagining that it is saving money?  Here’s case number one:

On a recent flight – a mechanical engineer from a sophisticated international equipment company – one of the Fortune Global “50” - told me that according to “new policy”, he and his peers must elect to “save money” by no longer flying direct to their business destinations.  Instead, they must fly via connecting destinations – adding sometimes 2x or more of inflight and travel time from their home base to broader destinations.   In the short run:  this company “saves” travel dollars – lets estimate that very optimistically the savings is 50% of a domestic ticket.  The average domestic ticket price approximates $250 (1).  This company flies dozens of key employees on business trips - many at least twice per month.

What are the consequences for the engineer - and his dozens of colleagues?  They spend dramatically more “unproductive” time on the airplane – time when they cannot be working, contributing, or meeting with customers.  Perhaps this travel time is SO unproductive that they will choose to travel less (THIS would certainly reduce travel costs…). 

However, if meeting customers, vetting suppliers, evaluating new equipment (etc.) for this growing business remains important… then these employees will incur these “losses” to productivity.  The company will “save” out-of-pocket travel expenses – likely booked as SG&A.  This engineer and his peers will also understand viscerally a core message from the company about the “value” of their time and contribution - and business urgency. 

• What is the net value of this decision? 
• In light of that contribution (and the losses associated with the travel policy), have the financial managers at this company made a wise decision? 
• What are the gains to the business - and what are the “real” costs?

Project Management Performance Through Engagement and Respect

Leaders and business owners often face critical project and team management issues when faced with challenges that leverage the future of the business.

For the most significant leveraged projects such as construction, expansion, acquisitions or mergers, a business must secure the services of independent professionals and firms due to the required expertise and licenses. A world-class architect, engineer, lawyer or accountant in a specialized field is both a valuable and costly asset. They have the potential to contribute great value or (if misdirected) squander a lot of cash on behalf of the owner. But the individual capabilities offered by specialized team members are only one part of the picture; to get real business value, the business needs to create a powerful and well-functioning team from both the internal staff and specialized external service providers.

Patrick O'Shei writes about managing a team of independent professionals to produce an optimal timely and valuable business outcome on a recent project. Creating this type of result is an incredibly difficult business challenge due to the complexity, competing interests, the high-stakes project demands, and the workloads of the professional team members involved.

Building Engagement and Respect across the team are keys to this effort. A successful leader and project effort ENGAGES team members on two levels - both formally, and informally - in the following ways, so that each team member:

1. Makes specific emotional commitments to the desired end-result as defined by the owner-organization.
2. Works willingly within the constructs of a proper professional engagement as defined in a work agreement or contract.

To achieve good outcomes, the team needs to offer RESPECT to each other (and experience it, across and among its members) - on three levels:

1. Each person treats others with respect on a human level with time for listening and addressing concerns.
2. Each person treats others with respect on a professional level with weighing of opinion, and appropriate deference, based upon their areas of expertise.
3. The business and the team treats each team-member (whether person or firm) with contractual respect. This means that all seek to make and understand decisions in the context of the contractual obligations, licenses and liabilities of each participating professional or firm.

These qualities set the ground-work for high performing teams in the complex and time-sensitive circumstances of strategic project management.

Case: A non-profit teaching institution faced erosion of margins and threat of survival. Read how the senior business manager formed and managed a professional team to implement a dramatic solution that is leading the business out of the crisis...

Read more on services we offer supporting businesses, owners and leaders to shape powerful teams when considering game-changing, high-stakes projects.

Business Growth: Complexity & Mixed Messages in Customer Service

Don Mick wrote of a recent automotive service experience...  one with which many might empathize. 

In his post, he writes of being alternately blessed (with affirmations and appreciation of his status as a customer of the auto dealership) and cursed (with negative and diminishing encounters that communicate that--as a customer--he's a bother and an inconvenience)--all within the same customer service transaction.  As a business leader, please consider the following observations:

1. How challenging is it, for even energetic and well-intentioned leaders to get all of the parts of an organization (and the people working within the organization) on the same page/ engaging with customers in a consistent and synchronous fashion?
2. How confusing and anxiety-provoking is this experience for the customer, a "whipsaw" effect? I hazard that the absence of consistent and clear communication regarding a customer's status, is in fact an overall strong negative/ "dissatisfier", with regard to how that customer feels about the dealership/ service provider;
3. How little of this story is really about immediate "competence". Most of Don's story is really about empathy (or the lack thereof), the ripple effects of poor quality (first, in the product; then, in the service-event that attempted to fix the product), and the missing "end-to-end view" of the customer transaction and the "special" customer, by the dealership service team, and by a single dealership "owner."

Simply proclaiming customers as "special" and providing them with "bling" does not make them so.  Even if service providers proclaim it (but don't act consistently with the proclamation) customers sure won't believe it.

Only when an organization actually organizes its work with the customer (and the customer's experience) at the center, as a top priority--and changes "business as usual"--will consistent messages, and unqualifiedly happy customers, emerge from the front doors.

As a business leader/ manager:  What is YOUR "teaching story" of a specific moment of customer engagement--and what did you observe/ learn from it, both about yourself as a customer--and/ or about the perspective of the service provider?

Managing the "Right Stuff" - Leadership Lessons from the NBA

The No-Stats All-Star - NYTimes.com

I’m not a basketball fan. Before reading this article, I couldn’t have named a single player on the Houston Rockets – and in fact, had never heard of Shane Battier, who is the subject of this article.  Shane Battier, his approach, and the observations made about the larger “mode of managing” illuminated here have leadership repercussions what we focus on, where we find ourselves as a society and an economy today – and I can feel the tremors rippling through leader- and management development as well.

In summary:  Shane Battier is an individual with undistinguished individual statistics.  However, he does many of the "right things", the unselfish things, the ego-less things... those things that make his teammates' performances improve, that dramatically improve his team's overall odds of winning games - and increase opponent's odds of losing.  The Houston Rockets have been able to create a "meta model" of performance - and measure these intangible but very real contributions of Shane Battier - and in fact, of every Houston Rocket.

[Note to author Michael Lewis: Basketball isn’t the only ‘arena’ where we should be looking at team-level performance metrics (and the ways that individual performance affects the team and other members on it). Basketball isn’t the only place where we should be attending to “team dynamics” and team performance – instead of individual performance. It isn’t the only place where we should be thinking about metrics and measures that really matter to the long-term health and vitality of the enterprise. Just thought you’d want to know.]

Our economy – and esp. the financial system, set up with incentives and loose regulation for the Masters of the Universe, could drive sales (see this note elaborating a view on the financial system meltdown). 

Apparently, however, this system could not review the odds as well as Daryl Morey and Shane Battier, apparently can’t digest and respond to data as well, or understand from the data what it is that they should be doing.  Apparently, this system and the leaders and players in it, could learn a lot about managing – and about winning, overall as a team - from watching the NBA, and from studying the Houston Rockets.

The No-Stats All-Star - NYTimes.com

Article Excerpts:

Statistical Anomaly His greatness is not marked in box scores or at slam-dunk contests, but on the court Shane Battier makes his team better, often much better, and his opponents worse, often much worse.

Here we have a basketball mystery: a player is widely regarded inside the N.B.A. as, at best, a replaceable cog in a machine driven by superstars. And yet every team he has ever played on has acquired some magical ability to win.

He may not grab huge numbers of rebounds, but he has an uncanny ability to improve his teammates’ rebounding. He doesn’t shoot much, but when he does, he takes only the most efficient shots. He also has a knack for getting the ball to teammates who are in a position to do the same, and he commits few turnovers. On defense, although he routinely guards the N.B.A.’s most prolific scorers, he significantly ­reduces their shooting percentages. At the same time he somehow improves the defensive efficiency of his teammates...

... the big challenge on any basketball court is to measure the right things. The five players on any basketball team are far more than the sum of their parts; the Rockets devote a lot of energy to untangling subtle interactions among the team’s elements. To get at this they need something that basketball hasn’t historically supplied: meaningful statistics.

There is a tension, peculiar to basketball, between the interests of the team and the interests of the individual. The game continually tempts the people who play it to do things that are not in the interest of the group.

... [in the game], the player, in his play, faces choices between maximizing his own perceived self-interest and winning. The choices are sufficiently complex that there is a fair chance he doesn’t fully grasp that he is making them.

... instead of grabbing uncertainly for a rebound, for instance, Battier would tip the ball more certainly to a teammate. Guarding a lesser rebounder, Battier would, when the ball was in the air, leave his own man and block out the other team’s best rebounder.  A player whom Morey describes as “a marginal N.B.A. athlete” not only guards one of the greatest — and smartest — offensive threats ever to play the game - but renders him a detriment to his team.

Knowing the odds, Battier can pursue an inherently uncertain strategy with total certainty. He can devote himself to a process and disregard the outcome of any given encounter.